ILNews

7th Circuit rules in favor of attorneys in failed business investment

Back to TopCommentsE-mailPrintBookmark and Share

A group of investors suing attorneys who worked on the establishment of two business entities – which later failed – were unable to show the 7th Circuit Court of Appeals that the attorneys owed the investors any legal duty.

The federal appellate court upheld summary judgment in favor of Beau Jack White and James Beaman and their firm Johnson Beaman Bratch Beal and White LLP on the investors’ claims of RICO violations, conversion, securities fraud, civil conspiracy and legal malpractice.

Real estate investor Chad Seybold hired White and Beaman to help him create two business entities, one of which would be partially owned by a group of investors. At a seminar with potential investors, White explained the concept of limited individual liability afforded by an LLC structure. Seybold told the potential investors that White represented one of the new companies being formed, he’s looking out for the investors’ best interests, and White is working for Seybold and the investors. White never clarified or corrected Seybold’s statements that he was not the attorney for the investors.

Investors sank more than $1 million in Seybold’s plan; about a year later he informed investors he was filing for bankruptcy and that their investments were gone.

The plaintiffs alleged that they each established an attorney-client relationship with the defendants, and even if they didn’t, the defendants still owed them a duty under the Indiana Rules of Professional Conduct, most especially Rule 4.3 laying out a lawyer’s responsibility when dealing with unrepresented persons.

The only attorney-client relationship formed was with the two businesses, the 7th Circuit ruled, rejecting the investors’ claim that White’s presentation at the seminar implied existence of the attorney-client relationship with each investor. The judges also didn’t think Seybold’s comments during White’s presentation implied an attorney-client relationship with investors. They also rejected the claims that a duty was implied under the Rules of Professional Conduct.

“Further, several plaintiffs’ subjective beliefs demonstrate that they understood that the defendants were acting on behalf of the investors as a group, not individually, and that the defendants’ involvement in the investment plan did not last beyond the companies’ formation. And the disclaimer included in the operating agreement that each investor signed should have alerted a reasonable investor that the defendants were not representing them in their personal capacities,” Judge Daniel Manion wrote.

The 7th Circuit also found the investors couldn’t rely on the statements made at the seminar to support their securities fraud or actual fraud claims.

“We need not address the merits of each independent tort … because the plaintiffs have failed to demonstrate that the defendants acted in concert with Seybold to commit any unlawful act, or that they accomplished a lawful purpose through unlawful means,” Manion wrote.



 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Call it unauthorized law if you must, a regulatory wrong, but it was fraud and theft well beyond that, a seeming crime! "In three specific cases, the hearing officer found that Westerfield did little to no work for her clients but only issued a partial refund or no refund at all." That is theft by deception, folks. "In its decision to suspend Westerfield, the Supreme Court noted that she already had a long disciplinary history dating back to 1996 and had previously been suspended in 2004 and indefinitely suspended in 2005. She was reinstated in 2009 after finally giving the commission a response to the grievance for which she was suspended in 2004." WOW -- was the Indiana Supreme Court complicit in her fraud? Talk about being on notice of a real bad actor .... "Further, the justices noted that during her testimony, Westerfield was “disingenuous and evasive” about her relationship with Tope and attempted to distance herself from him. They also wrote that other aggravating factors existed in Westerfield’s case, such as her lack of remorse." WOW, and yet she only got 18 months on the bench, and if she shows up and cries for them in a year and a half, and pays money to JLAP for group therapy ... back in to ride roughshod over hapless clients (or are they "marks") once again! Aint Hoosier lawyering a great money making adventure!!! Just live for the bucks, even if filthy lucre, and come out a-ok. ME on the other hand??? Lifetime banishment for blowing the whistle on unconstitutional governance. Yes, had I ripped off clients or had ANY disciplinary history for doing that I would have fared better, most likely, as that it would have revealed me motivated by Mammon and not Faith. Check it out if you doubt my reading of this, compare and contrast the above 18 months with my lifetime banishment from court, see appendix for Bar Examiners report which the ISC adopted without substantive review: https://www.scribd.com/doc/299040839/2016Petitionforcert-to-SCOTUS

  2. Wow, over a quarter million dollars? That is a a lot of commissary money! Over what time frame? Years I would guess. Anyone ever try to blow the whistle? Probably not, since most Hoosiers who take notice of such things realize that Hoosier whistleblowers are almost always pilloried. If someone did blow the whistle, they were likely fired. The persecution of whistleblowers is a sure sign of far too much government corruption. Details of my own personal experience at the top of Hoosier governance available upon request ... maybe a "fake news" media outlet will have the courage to tell the stories of Hoosier whistleblowers that the "real" Hoosier media (cough) will not deign to touch. (They are part of the problem.)

  3. So if I am reading it right, only if and when African American college students agree to receive checks labeling them as "Negroes" do they receive aid from the UNCF or the Quaker's Educational Fund? In other words, to borrow from the Indiana Appellate Court, "the [nonprofit] supposed to be [their] advocate, refers to [students] in a racially offensive manner. While there is no evidence that [the nonprofits] intended harm to [African American students], the harm was nonetheless inflicted. [Black students are] presented to [academia and future employers] in a racially offensive manner. For these reasons, [such] performance [is] deficient and also prejudice[ial]." Maybe even DEPLORABLE???

  4. I'm the poor soul who spent over 10 years in prison with many many other prisoners trying to kill me for being charged with a sex offense THAT I DID NOT COMMIT i was in jail for a battery charge for helping a friend leave a boyfriend who beat her I've been saying for over 28 years that i did not and would never hurt a child like that mine or anybody's child but NOBODY wants to believe that i might not be guilty of this horrible crime or think that when i say that ALL the paperwork concerning my conviction has strangely DISAPPEARED or even when the long beach judge re-sentenced me over 14 months on a already filed plea bargain out of another districts court then had it filed under a fake name so i could not find while trying to fight my conviction on appeal in a nut shell people are ALWAYS quick to believe the worst about some one well I DID NOT HURT ANY CHILD EVER IN MY LIFE AND HAVE SAID THIS FOR ALMOST 30 YEARS please if anybody can me get some kind of justice it would be greatly appreciated respectfully written wrongly accused Brian Valenti

  5. A high ranking Indiana supreme Court operative caught red handed leading a group using the uber offensive N word! She must denounce or be denounced! (Or not since she is an insider ... rules do not apply to them). Evidence here: http://m.indianacompanies.us/friends-educational-fund-for-negroes.364110.company.v2#top_info

ADVERTISEMENT